Pebblebrook Hotel Trust (NYSE:PEB) shareholders have endured a 41% loss from investing in the stock five years ago
In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But even the best stock picker will only win with some selections. So we wouldn't blame long term Pebblebrook Hotel Trust (NYSE:PEB) shareholders for doubting their decision to hold, with the stock down 48% over a half decade. We also note that the stock has performed poorly over the last year, with the share price down 26%. Even worse, it's down 27% in about a month, which isn't fun at all.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for Pebblebrook Hotel Trust
Pebblebrook Hotel Trust isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last five years Pebblebrook Hotel Trust saw its revenue shrink by 3.9% per year. While far from catastrophic that is not good. The share price decline at a rate of 8% per year is disappointing. But it doesn't surprise given the falling revenue. Without profits, its hard to see how shareholders win if the revenue keeps falling.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. You can see what analysts are predicting for Pebblebrook Hotel Trust in this interactive graph of future profit estimates.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Pebblebrook Hotel Trust's TSR for the last 5 years was -41%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
While the broader market lost about 17% in the twelve months, Pebblebrook Hotel Trust shareholders did even worse, losing 25% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 7% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Pebblebrook Hotel Trust , and understanding them should be part of your investment process.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
